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Almost a million subscribers deserted AOL over the last three months as the giant ISP continues to lose customers.

As of the end of June, AOL had 20.8m punters in the US - down 917,000 on Q1 and a massive slump of 2.6m compared to the same period last year.

In Europe, AOL also lost customers although not to the same extent as in the US. At the end of June AOL Euopre, which includes the UK, Germany and France, had 6.2m users - down 99,000 from the previous quarter and dipping 80,000 compared to last year.

The drop in numbers also hit revenues with takings from subscriptions down nine per cent ($168m). And although ad revenues jumped 45 per cent, overall revenues in the three months to June fell four per cent ($80m) to $2.1bn.

Yesterday, parent Time Warner agreed to cough up $2.5bn to settle legal action lodged by shareholders dating back to its purchase of AOL.

In a statement Minneapolis law firm Heins Mills & Olson said the settlement "will benefit millions of shareholders who purchased or acquired AOL and Time Warner securities between January 27, 1999 and August 27, 2002".

The class action lawsuit relates to allegations that AOL inflated subscriber numbers and ad earning revenue in the early part of the decade. ®